Mar 29 2009
Geithner appeaers on Meet the Press and This Week to explain banking plan
The Sunday news shows were dominated by Tim Geithner in his campaign to explain the government banking plan to the American people. On “This Week With George Stephanopoulos” Geitner stated that the biggest lesson he has learned is that the worst thing government can do is nothing.
Following Geithner’s appearance on “This Week” Paul Krugman appeared and added an interesting perspective to the toxic assets plan. Krugman estimated the total available funds of Geitner’s plan at about 100 billion, noting that the amount of toxic assets could exceed two trillion dollars. Krugman went on to compare the Geithner plan to Japanese attempts to bail out banks during the Japanese economic crisis of the 90’s. It is generally believed the the Japanese government moved slowly and with limited conviction, utilizing a series of temporary fixes like small government loans or investments. Krugman’s argument is that in word the Obama/Geithner plan is differs from the Japanese but possibly in word only.
This article illustrates that there may be fundamental differences in how the US regulatory bodies and congress force dangerous weaknesses to the surface rather than quietly propping failed banks up over a long period of time. Though it does go on to state that the US could face a watered down version of the Japanese crisis.
Politically the Obama administration is making the only move it can. Criticized by many conservative politalkers as having misguided priorities and being urged to focus on the banking crisis first, and at the expense of all other issues , Obama and Geitner have proposed a middle of the road plan compromising the extremes of the laissez faire approach, which would allow the banks to fail, and the full government assumption of all toxic debt, or bad bank, which would expose tax payer to too much risk.
